HOMEBUYERS must act quickly to complete their transactions before the stamp duty level is raised at the end of the year, a solicitor has warned.
The current stamp duty “holiday” comes to an end on the last day of this year – and a considerable number of properties are expected to be caught by the rise.
When stamp duty returns, purchases above £125,000 will incur tax at 1% of the sale price. The current baseline is £175,000.ŠStamp Duty on purchases above £250,000 will continue to be levied at 3% three percent.
That means a purchaser buying a property at £165,000 will lose out on a saving of £1,650 if the sale goes through after the New Year’s Eve deadline.
In addition, December 31 also marks the end of the reduced rate of VAT charged on legal fees. With VAT rising from 15% to 17.5%, further increased costs will be incurred by homebuyers from January 1, 2010.
Richard Gillatt, head of property at Baxter Caulfield, said: “With the impending withdrawal of the stamp duty holiday and the return of VAT to 17.5%, those thinking of making a purchase need to act quickly if they are to avoid making the process more costly.”
Research by the Royal Institution of Chartered Surveyors suggested that members in Yorkshire were relaxed about the return to previous stamp duty rates.
While surveyors in the Midlands, Wales and Scotland believe they will see a fall in activity next year, RICS members in Yorkshire and Humber were confident they can weather the shift in policy.
Most surveyors in the region remain optimistic that the housing market will continue to recover steadily, despite the return to the previous bands for stamp duty.
It follows a survey earlier this month – when most Yorkshire surveyors reported rises rather than falls in house prices and an increase in new instructions.
Bruce Collinson, spokesman for the RICS in Yorkshire, agreed: “This return to the previous bands for stamp duty will coincide with the return of 17.5% VAT, so it will prove unhelpful to the market by any measure.
“Recent increases in buyer activity have been driven by the shortage of supply in the middle market.
“But a sustainable recovery needs first-time buyers to return and they are the ones most affected by this stamp duty tax as it eats into hard-earned savings at a time when lenders demand much higher deposits.
“A return to the status quo will be of benefit to no one – and as such the RICS believes that rather than simply reverting back to the old structure for stamp duty, the imminent change provides an opportunity for the Government to introduce a wholesale restructuring of the tax.
“Specifically RICS favours moving from the current slab structure to a marginal system with no homebuyer paying anything on the first £150,000 of their new home.”